Customs Excise Tribunal Upholds Service Tax Inclusion for Non-Monetary Benefits

Lease Agreement's Complimentary Services and Discounts to be Considered in Gross Taxable Value, Rules Tribunal

In a significant ruling, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has upheld the inclusion of non-monetary benefits in the gross taxable value for service tax purposes. This decision comes in response to the appeal by M/s. Hotel President Planet against the Principal Commissioner of CGST & Central Excise, Indore, concerning the valuation of taxable services under the Finance Act, 1994.

The appellant, M/s. Hotel President Planet, had entered into a lease agreement with Hotel Lemon Tree for renting out their immovable property. The agreement included additional non-monetary considerations such as complimentary room nights and discounts on food and beverages, which the appellant argued should not be included in the taxable value. The audit, covering the period from October 2016 to June 2017, noted these additional benefits, leading to a demand for service tax under Section 67 of the Finance Act, 1994.

The tribunal, presided over by Dr. Rachna Gupta, Member (Judicial), examined whether these non-monetary considerations formed part of the gross value for service tax. Referring to Section 67, which defines "consideration" to include both monetary and non-monetary forms, the tribunal ruled that the complimentary services and discounts indeed constituted taxable value. The decision affirms that all forms of consideration, monetary or otherwise, related to the provision of taxable services, are to be included in the service tax calculation.

M/s. Hotel President Planet's argument that these complimentary services were for verification purposes and not additional benefits was not accepted by the tribunal. The tribunal maintained that the lease agreement clearly included non-monetary benefits as part of the consideration received by the appellant, thereby necessitating their inclusion in the taxable gross value.

Despite the appellant's claim of an incorrect calculation of complimentary nights and food discounts, the tribunal found no substantial evidence to support this contention. Consequently, the tribunal dismissed the appeal, emphasizing the principle that any form of consideration tied to a taxable service must be accounted for in the service tax base.

This ruling reinforces the comprehensive approach to service tax calculation, ensuring that all received benefits, monetary or non-monetary, are duly taxed in accordance with the Finance Act's provisions.

Bottom Line:

Service Tax - Valuation of taxable services - Additional considerations received in non-monetary forms such as complimentary room nights and discounts on food and beverages to be included in the gross value for service tax purposes.

Statutory provision(s): Finance Act, 1994, Section 67

M/s. Hotel President Planet v. Principal Commissioner of CGST & Central Excise, Indore, (CESTAT)(New Delhi)(Principal Bench) : Law Finder Doc Id # 2809075